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Old 02-03-2010, 06:34 PM
 
Location: Bothell, Washington
2,812 posts, read 5,191,158 times
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Quote:
Originally Posted by caravan View Post
Feel free to not generalize about young couples, thanks. My husband and I are 30, buying our first home (2 bed/1 ba, 1300 sq. ft--not a monster), and putting down 35%.
I'm in the same ranks as you! I am 33, my wife is 29- we just bought a very nice, brand new- but modestly sized 1300 square foot home last week with a sizeable down payment. We don't feel we need anything bigger- it's plenty of space to live in, even when we eventually have a child given that it has 3 bedrooms and 2 and a half baths.
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Old 02-04-2010, 03:09 PM
 
8 posts, read 22,796 times
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Quote:
Originally Posted by jm31828 View Post
I'm in the same ranks as you! I am 33, my wife is 29- we just bought a very nice, brand new- but modestly sized 1300 square foot home ........ it's plenty of space to live in, even when we eventually have a child given that it has 3 bedrooms and 2 and a half baths.
Wait till you have those kids...
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Old 02-04-2010, 03:11 PM
 
8 posts, read 22,796 times
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FOr those saying that another price drop is coming I fully agree, unless the govt extends their first time buyers plan. in my area the only houses that are selling are those that are in the price range of the first time buyer (less than $200k) Houses that are above 290k are just sitting.
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Old 02-26-2010, 10:05 AM
 
Location: Columbia, MD
553 posts, read 1,606,485 times
Reputation: 398
Quote:
Originally Posted by gte011h View Post
FOr those saying that another price drop is coming I fully agree, unless the govt extends their first time buyers plan. in my area the only houses that are selling are those that are in the price range of the first time buyer (less than $200k) Houses that are above 290k are just sitting.
Look at evaluate the relevant news since January:

1. In testimony to Congress this week, Chairman Bernanke re-affirmed his commitment to keeping interest rate at zero for an extended period of time.

2. New and existing home sales were released this week, both of which were below terrible. They were all time bad:

Econoday Report: Existing Home Sales*February*26,*2010

New Home Sales Take It on the Nose -- Seeking Alpha

3. Leading economic indicators are accelerating downward, suggesting we are starting another dip in the economy

Index forecasts strong growth through April - USATODAY.com

4. Fed programs to buy MBS is winding down, but is also already ramping back up due to weakness in this market...can't find the link but I posted it in another thread recently.

5. Inflation is rising more than expected in goods and services while deflating in income and most asset classes:

Looking Behind the Core Inflation Numbers

6. FHA Loan delinquencies spiked 62%,but apparently that's not as bad as it sounds:

Late FHA Loans Spike 62% - But It's Not As Bad As It Sounds (http://www.wibw.com/nationalnews/headlines/84984857.html - broken link)

So putting it all together, what does that mean?

The bubble has burst. It would require armageddon (not likely this year) and deflation in energy, food, and services for home prices to significantly decline in real dollars here on out.

The government is running the printing presses at full speed. Yet assets continue to deflate. This suggests they do not see any risk or reason to slow down. It would also suggest there is an effect coming through on the dollar which directly affects the consumer via higher oil/energy prices as well as higher commodity prices.

Sounds like 2010 into as far out as 2012 will be all about stagflation!

Your purchase power will be eroded, and homes will get cheaper adjusted for inflation, but in nominal dollars, you won't see many 290k homes selling for much less anytime soon.

Also, given the tax credit is already showing fatigue as of December, home sales will continue to slide. More and more home owners will decide to pull their homes from the market and sit it out, maybe hoping for better fortunes in 2011 or 2012 (laughable). Buyers will disappear as money for lending disappears. Inventory will shrink, but not because of any improvements.

Once it's formally acknowledged we are in an economic slowdown, probably sometime before the elections this year, we'll get another round of government stimulus. It won't help much, though. If people aren't buying today with sub 5% fixed year loans and a 6.5-8k tax credit, I'm not sure there'll be a bigger appetite for homes with higher unemployment and worsening economic conditions in another 6-9 months.

IF (and this is a big IF) the US government continues on its current path, then it is assured that by 2012 there will be a massive deflationary collapse in the US, and probably Europe and China as well. At that point, we may see dramatic drops in home prices during the most severe part of this depression.

Don't believe what any talking head says on TV or in print. Most never foresaw our current plight, and believe things are getting better. We're in a jobless recovery, just like my wife is partially pregnant.
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Old 02-26-2010, 11:03 AM
 
314 posts, read 447,819 times
Reputation: 103
Quote:
Originally Posted by trickymost View Post
Look at evaluate the relevant news since January:

1. In testimony to Congress this week, Chairman Bernanke re-affirmed his commitment to keeping interest rate at zero for an extended period of time.

2. New and existing home sales were released this week, both of which were below terrible. They were all time bad:

Econoday Report: Existing Home Sales*February*26,*2010

New Home Sales Take It on the Nose -- Seeking Alpha

3. Leading economic indicators are accelerating downward, suggesting we are starting another dip in the economy

Index forecasts strong growth through April - USATODAY.com

4. Fed programs to buy MBS is winding down, but is also already ramping back up due to weakness in this market...can't find the link but I posted it in another thread recently.

5. Inflation is rising more than expected in goods and services while deflating in income and most asset classes:

Looking Behind the Core Inflation Numbers

6. FHA Loan delinquencies spiked 62%,but apparently that's not as bad as it sounds:

Late FHA Loans Spike 62% - But It's Not As Bad As It Sounds (http://www.wibw.com/nationalnews/headlines/84984857.html - broken link)

So putting it all together, what does that mean?

The bubble has burst. It would require armageddon (not likely this year) and deflation in energy, food, and services for home prices to significantly decline in real dollars here on out.

The government is running the printing presses at full speed. Yet assets continue to deflate. This suggests they do not see any risk or reason to slow down. It would also suggest there is an effect coming through on the dollar which directly affects the consumer via higher oil/energy prices as well as higher commodity prices.

Sounds like 2010 into as far out as 2012 will be all about stagflation!

Your purchase power will be eroded, and homes will get cheaper adjusted for inflation, but in nominal dollars, you won't see many 290k homes selling for much less anytime soon.

Also, given the tax credit is already showing fatigue as of December, home sales will continue to slide. More and more home owners will decide to pull their homes from the market and sit it out, maybe hoping for better fortunes in 2011 or 2012 (laughable). Buyers will disappear as money for lending disappears. Inventory will shrink, but not because of any improvements.

Once it's formally acknowledged we are in an economic slowdown, probably sometime before the elections this year, we'll get another round of government stimulus. It won't help much, though. If people aren't buying today with sub 5% fixed year loans and a 6.5-8k tax credit, I'm not sure there'll be a bigger appetite for homes with higher unemployment and worsening economic conditions in another 6-9 months.

IF (and this is a big IF) the US government continues on its current path, then it is assured that by 2012 there will be a massive deflationary collapse in the US, and probably Europe and China as well. At that point, we may see dramatic drops in home prices during the most severe part of this depression.

Don't believe what any talking head says on TV or in print. Most never foresaw our current plight, and believe things are getting better. We're in a jobless recovery, just like my wife is partially pregnant.


I agree with everything in your post except for the pricing in the upper end homes. In my area, they are still way overpriced and not selling. There are weekly drops in price of 100K+. I feel that they will still fall in price another 10-15% at the minimum.

I did like your comment in bold.
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Old 02-26-2010, 11:19 AM
 
Location: East Bay Area
165 posts, read 566,783 times
Reputation: 94
Contrary to the most of the country, the average price of homes in CA have increased 5% in 2009.
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Old 02-26-2010, 11:43 AM
 
Location: Columbia, MD
553 posts, read 1,606,485 times
Reputation: 398
Quote:
Originally Posted by mmoorecharlotte View Post
[/b]

I agree with everything in your post except for the pricing in the upper end homes. In my area, they are still way overpriced and not selling. There are weekly drops in price of 100K+. I feel that they will still fall in price another 10-15% at the minimum.

I did like your comment in bold.
I don't know what happens with the high end homes. I'm guessing they just don't sell...certainly there are no or few buyers in the market, there is little underwriting from the banks, and subdividing large homes into apartments doesn't seem like it would go over well with the neighbors.

Your guess is as good as mine, but if I had to place a bet, I'm guessing the higher end properties just sit and sit and sit until eventually they're in foreclosure in a state of disrepair and can be sold for bargain prices.

We'll see!
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Old 02-27-2010, 08:09 AM
 
5,460 posts, read 6,336,854 times
Reputation: 1806
Quote:
Originally Posted by JonHomeHunter View Post
Contrary to the most of the country, the average price of homes in CA have increased 5% in 2009.
According to the FHFA, house values in CA in 4q09 were about a half a percent lower than they were in 4q08. If you're talking about average selling prices, the average moved up because the mix of houses sold has changed - the mid to high end isn't totally dead anymore which pushed the average up slightly.
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Old 02-27-2010, 11:09 AM
 
314 posts, read 447,819 times
Reputation: 103
Quote:
Originally Posted by trickymost View Post
I don't know what happens with the high end homes. I'm guessing they just don't sell...certainly there are no or few buyers in the market, there is little underwriting from the banks, and subdividing large homes into apartments doesn't seem like it would go over well with the neighbors.

Your guess is as good as mine, but if I had to place a bet, I'm guessing the higher end properties just sit and sit and sit until eventually they're in foreclosure in a state of disrepair and can be sold for bargain prices.

We'll see!
Trickymost,

Question, how will home prices not go down in the upper end market when you have the following?

1. Tons of shadow inventory of bank owned property being released onto the market.

2. Interest rates rising

3. High unemployment

4. Stricter bank guidelines in regards to lending

5. Much higher delinquency rates for Jumbo loans recently

6. People underwater just walking away on the McMansions

7. More homes don't sell = more inventory on the market = lower prices

If the only homes that are selling are the foreclosures/short sales in these high end communities, wouldn't that put further downward pressure on the prices?
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Old 02-27-2010, 12:19 PM
 
Location: Columbia, MD
553 posts, read 1,606,485 times
Reputation: 398
Quote:
Originally Posted by mmoorecharlotte View Post
Trickymost,

Question, how will home prices not go down in the upper end market when you have the following?

1. Tons of shadow inventory of bank owned property being released onto the market.

2. Interest rates rising

3. High unemployment

4. Stricter bank guidelines in regards to lending

5. Much higher delinquency rates for Jumbo loans recently

6. People underwater just walking away on the McMansions

7. More homes don't sell = more inventory on the market = lower prices

If the only homes that are selling are the foreclosures/short sales in these high end communities, wouldn't that put further downward pressure on the prices?
Your logic makes sense, but you have to keep in mind the games which the government is playing right now to prevent this from happening. Forget about the impact and down the road costs. They are working fervently to keep prices from free-falling.

Fannie is getting more $ to cover loan losses, the FHA should as well.

To address your points individually...

1. As long as market to market accounting is not implemented, banks will hold properties and let them on the market slowly. They do not have any financial or accounting reason to get them off their books, so this isn't an issue (and how they can book record bonuses/profits).

2. Could be an issue, but I figure we'll get volatility. My concern is what happens next month - I expect a rate shock. But look across the pond. Anytime we're looking to be in trouble, it becomes a bigger problem elsewhere (Dubai, PIGS) and there is a flight to safety. Plus if equities have a big fall in May-June this year as I expect, money will flow right back into bonds. It should hold rates down for a while, but eventually this bond bubble will burst - and it will be a bigger bursting than the .com or housing or derivatives bubbles were.

3. Hasn't prevented any problems with fudging of data or fooling markets, so even though you'd think this would be a cause for concern, for now it isn't.

4. Some people are still doing well. The big concern is not the few properties on the market, it's the existing homeowners. There are folks who have money to buy and can qualify for a jumbo.

5. See #1. Nobody (Fed, Fannie, Treasury, FHA, banks) has to account for these.

6. People don't walk away overnight. They just one day stop paying. And one of two things happens - banks work with them on a modification, or they squat for a while. See #5 and #1. Banks don't mind letting you squat for a while. If you're in a recourse state, they'll go after you eventually if you stop paying. And they'd rather buy time to build capital, pray for housing to recover, or wait for a new set of bailouts from the government.

7. Inventory won't grow unless there's an armageddon scenario. Many people will stop spending and fight to stay in their homes. Others will see the writing on the wall and will stay put, perhaps forgetting about that new job or selling of that home. Some will be able to afford their homes once new programs introduced by FNM and FRE (at the behest of the administration). Others will become landlords. And the banks will never release all their inventory on the market at once. Someone can correct me if I'm wrong, but I believe during the later years of the great depression, inventories of homes was very low. Same for other more severe recessions since then.

Make no mistake - the game now is to mimic Japan in the 90s. Accept low GDP growth for years at the expense of cushioning the country from a sharp and painful economic collapse. Strategically devalue the currency and hope inflation eats into some of the debt. Pray stimulus programs do just enough to prevent armageddon and reduce household housing costs so they can stay in their homes.

Your concerns become more relevant, IMO, looking out a bit further, say past 2012:

1. Assume one or more major banking institutions fail (BofA, Citi, Wells Fargo). Who will take their place lending?

2. What happens when the boomers retire en masse and nobody is moving up the property ladder because prices are stagnant?

3. What is the cumulative effect of chronically high unemployment?

4. What will be the long term impact of higher interest rates?

5. What will be the impact of higher taxes (income, property, VAT, sales tax, misc. fees) and lower services?

That's when the picture becomes more bleak and the only real question is whether we get a deflationary collapse or an inflationary collapse. I'm of the mind it's the former. But, historically, there's not been a deflationary collapse of a developed country which is a net-debtor nation, so it's hard to rule out severe hyper inflation as well.

I guess the bottom line question is, does it really matter? Either way, the high end of the housing market will eventually have the problem you correctly identified.
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